a2a 2015 investor guidebook · • the business units of the company have a first class asset base...
TRANSCRIPT
a2a2015
InvestorGuidebook
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent.
2
DISCLAIMER - This document has been prepared by A2A solely for investors and analysts. This document does not constitute an offer or invitation to purchase or subscribe any shares or other securities and neither it nor anypart of it shall form the basis of or be relied upon in connection with any contract or commitment whatsoever. Some information contained herein and other material discussed at the meetings may include forward-lookinginformation based on A2A’s current beliefs and expectations. These statements are based on current plans, estimates, projections, and projects and therefore you should not place undue reliance on them. Forward-lookingstatements involve inherent risks and uncertainties. We caution you that a number of important factors could cause actual results to differ materially from those contained in any forward-looking statement. Such factorsinclude, but are not limited to: changes in global economic business, changes in the price of certain commodities including electricity, gas and coal, the competitive market and regulatory factors. Moreover, forward-lookingstatements are current only at the date they are made.
This symbol marks the pages where Exceldownloads are availableHistorical series available in the Annual andquarterly Databooks:http://www.a2a.eu/en/investor/tool/index.htmlor in dedicated sections
This symbol marks the pages which may besubject to updates during the year
Reference to more in-depth, updates anddocuments available in A2A website@
Resources:
Databook in excel: this file is part of the
Guidebook kit and contains annual and quarterlyeconomic, financial and operational Company data as of2008 and all the tables published in this document.
Our Worldp. 4 - 26
Our Resultsp. 27 - 42
Our Responsibilitiesp. 43 - 53
Welcome to A2A Investor Guidebook,prepared for investors and financialanalysts to get a thorough insight into theA2A Group.In order to get the most out of it we haveprovided the Resources section aside, whichrefers to additional material available in thecompany website: www.a2a.eu. You willfind further such references in the Indexpages.
We would like to get your feedback andsuggestions to improve this product.Please write to: [email protected]
A2A Investor Relations Team
The Guidebook starts with the Company Profile at page 3…
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent.
Our Results• Positive 2014 results were achieved despite the
difficult macroeconomic context and theworsening of most of the economic indicators,specifically in the electricity sector.
• With respect to these external dynamics, theGroup reacted by continuing with the initiativesto improve operational efficiency, which helpedto sustain the profitability
• Debt reduction continued posting satisfactoryresults
• A2A medium-term financial strategy is aimed atlengthening the average debt maturity,maintaining an adequate financial flexibility andlowering the cost of debt to support theCompany rating
• A2A adopts a prudent energy risk policy, part ofits Enterprise Risk Management model, whosepurpose is to further develop and integrate riskmanagement activities into the business process
Company Profile
Our World• A2A is active in energy (electricity and gas),
cogeneration and district heating, waste anddistribution networks – a business diversificationwhich spans from regulated to market exposurethus considerably lowering its economic riskprofile
• Born in 2008 from the merger of AEM, ASM andAMSA, A2A operates throughout Italy,predominantly in Lombardy
• The business units of the company have a firstclass asset base - both plants and networks. Longterm concessions increase visibility
• A2A business model is very flexible. It allows foroptimizations both in the business units andacross them
• At international level A2A mainly operates inMontenegro through EPCG (electricity)
• The current strategy has been set out in the 2015-2019 Strategic Plan. The main lines of the Plan arethe following:
- Restructure: substantial reduction inthermoelectric power generation exposure
- Relaunch: growth acceleration in environment,smart networks and energy services
- Reshape: buying options in smart city and greeneconomy
- Discipline in operations and capital- Dialogue & engagement with key stakeholders- Digital & technogical transformation
Our Responsibilities• A high weight of green component
characterizes A2A asset portfolio. Large scalerenewable production (hydroelectric, WTE),high efficiency production (cogeneration withlower CO2 emissions) and innovativetechnologies to increase energy savings. A2Amay also leverage on a large and loyalcustomer base as a natural hedge for its energyportfolio. These mark the Companycommitment to sustainability, a yet untappedsource of value for investors
• A dividend of 0.0363 euros per share, up by10%, was submitted to AGM approval
• Milan and Brescia cities are the majorshareholders with a joint control
• The shift to a traditional governance model,occurred in June 2014, facilitates decisionmaking and emphasizes the central role of theBoard of Directors
3
A2A - The leading Italian multiutility
(1) Group net income adjusted for the impact of extraordinary items: 2014 = 175€M; 2013 = 156€M; 2012 = 116 €M; 2011 = 165 €M
Business units: top strengths
Generation&Trading∼2 GW hydro installed capacity in Italy
Energy Retailmarket leader for quality and customer satisfaction
Cogeneration and District Heatingfirst domestic operator
Wasten. 1 for electricity produced by WTE plants
Networksincumbent in its 3 key gas areas
EPCG∼0.7 GW hydro installed capacity (76% of total)
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent.
4
Index
Our World Our Results Our Responsibilities
More in-depth, updates and documents available in the following website sections:• A2A Group: http://www.a2a.eu/en/company/• Assets and Activities: http://www.a2a.eu/en/plants_networks/• Major Transactions: http://www.a2a.eu/en/investor/overview/strategy/acquisition.html• Business Plan: http://www.a2a.eu/en/investor/conference/
@
A2A Group- The A2A Group 5- A2A in Europe 6- A2A Business Portfolio 7
Assets and Activities- Energy generation portfolio 8- Energy retail portfolio 9- Cogeneration and District Heating 10- Waste 11- Networks 12- EPCG company overview 13- Concessions portfolio 14
Benchmarking- A2A market position in its main businesses 15- Italian utilities 2014 EBITDA and business mix 16
Main regulatory framework- Networks 17- Networks - gas distribution tenders 18- District Heating 19
Major Transactions- Acquisitions & disposals – track record 20
Strategic Plan 2015-2019- Vision and key highlights 21- The 3Rs, the 3Ds and the additional projects 22- EBITDA and Net Income evolution 25- Capex plan & Cash-flow generation 26
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent. 5
The A2A Group
Our WorldA2A Group
(1) Of which 0.38% held through A2A Reti Gas; (2) There are put options on an additional interest in the company’s share capital
Energy Waste Cogeneration and District Heating Networks Other Companies
Areas of activity
(1)
(2)
Back to Index
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent. 6
A2A in Europe
Our WorldA2A GroupBack to Index
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent. 7
A2A business portfolio
About 70% of 2014 Ordinary EBITDA from regulated / quasi regulated activities(3). Ordinary EBITDA equal to 951 €M.
(1) Declared EBITDA equal to 1,024 €M, excluding then costs of redundancy schemes (-17 €M) and EBITDA from “Other services & Corporate” (-21 €M); (2) As of 2015 A2A Italian Energy business is split into twodifferent areas: Generation & Trading and Energy Retail; (3) Regulated activities: Networks, EPCG Electricity distribution, incentivized energy production; Quasi regulated activities: Urban Waste Collection &Treatment, District Heating, Public Lighting
Sources: Company Annual Reports
Our WorldA2A Group
2014EBITDA(1)
Back to Index
COGENERATION& DISTRICT HEATING
Cogenerationplants
Networks
63 €M 6%
WASTE
Collection andstreet sweeping
Treatment
222 €M 21%
NETWORKS
Water
Electricity networks
Gas networks
281 €M 26%
GENERATION &TRADING(2)
Fuel sourcing
Powergeneration
Whole-sale &
Trading
343 €M 32%
NETWORKS MANAGEMENT
DisposalHeat/Electricity saleand other services
Heat /Electricity
production
EPCG(Montenegro)
Power generation
Electricity networks
66 €M 6%
ENERGY RETAIL(2)
87 €M 8%
Electricity / Gas sales
free market regulated market
Public lighting
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent.
Sardinia
8
Hydro ~2 GW(1)
Thermal ~7 GW(1)
- CCGT: 5.3 GW (76%)
- Fuel oil: 0.9 GW (13%)
- Coal: 0.8 GW (11%)
WTE 0.3 GWCogeneration 0.2 GW
STRENGTHS
• Diversified and well-balanced generation mix, in order to exploitmarket opportunities and mitigate overall risk
• CCGT investment cycle completed - all plants are new or recentlyrevamped , highly efficient, with limited maintenance capex needed,no contractual constraints(4) (take or pay gas), no demand constraints(heat-lead)
• Highly flexible plant portfolio: almost 90% of hydro flexiblereservoir/basin vs. run-of-river; CCGT plants with a low minimum load
• Relevant market share in the Northern Zone
(1) net of: a) the shutdown of fuel-oil group of Monfalcone plant and group n.1 of Cassano plant,the disposal of Turbigo plant (thermoelectric plants); b) the deed for the non-proportional partialdemerger of Edipower (Udine hydroelectric plants except from Ampezzo and Somplago)
Northern
Central-Northern
Central-Southern
Southern
Sicily
Electricity marketzones
Energy generation portfolio
A2A presence
Our WorldAssets and activities
A2A GROUP GENERATION PORTFOLIO IN ITALY
(4) The procurement of gas is pursued through a set of contracts, diversified by duration (long term, yearly and spot), bycounterparties (in order to reduce the risk), by market place (regulated and OTC), by flexibility and by delivery point(foreign hubs, Italian border, PSV, end user).
Back to Index
EUROPEAN MARKETS
POWERItaly- Import/Export- IPEX Spot GME (MGP, MI,
MSD)- Load balancing Terna- MTE GME- IDEX Future Borsa Italiana- EEX Future
FranceSwitzerlandGermanyAustriaSloveniaGreeceMontenegro (via EPCG)
GASItaly- OTC trading (PSV)- P-Gas platform- PB-Gas platform
FranceNetherlandsGermanyAustriaSwitzerland
ENVIRONMENTAL MARKETSItaly (GME)Germany (EEX)UK (ICE-ECX)
CertificatesEmissions trading(2)
Green certificatesWhite certificatesLECs(3)
(2) EUA (European Allowance Unit), CER (Certified Emissions Reduction,ERU (Emission Reductions Unit), EEUA (European Allowance Unit forAviation); (3) Levy Exemption Certificates, UK
Assets pertaining to other business units:
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent. 9
Energy Retail portfolio
Our WorldAssets and activitiesBack to Index
STRENGTHS
• Competitive cost-to-serve for residential customers in core territories (< 20€/year)
• Cost-to-acquire: payback period < 1 year (average)
• Market leader for quality and good track record in customer satisfaction: A2Aranks at the top in the surveys for the domestic electricity market
• Complete range of energy solutions in Gas & Electricity for domestic customers,SMEs and large companies
• Solutions adapted to the specific needs of each segment and environmentallyfriendly (for example, )
• Digital channels: increase of the online bill penetration (from 7.7% in 2012 to 11%in 2014)
• Indirect channels
2014 Electricity Sales (GWh)
2014 Gas Sales (Mcm)
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent.
Cogeneration and District Heating
Our WorldAssets and activities
STRENGTHS
• High efficiency cogeneration and district heating are the mostwidely used system in Europe to achieve energy efficiency targets
• Boost for local investments• Clean and cutting-edge technology (e.g. heat pump)• Environmental benefits: reduction of pollutant emissions in
metropolitan areas (PM10, NOx, Sox, …)• Diversified technology/fuel mix (cogeneration, biomass, etc.)• No boiler requiring maintenance at user level• Tariff customisation• District cooling option
BUSINESS MODEL
MI
BG
BS
VA
Famagosta
Tecnocity
NovateMilanese
Goltara
Lamarmora
Carnovali
VareseVia Rossi
Lombardy
10
Back to Index
Canavese
Centrale Nord
HEAT RECOVERYFROM THIRD
PARTIESSOLAR
THERMAL
WASTETO
ENERGY
GAS-FIRED HIGH EFFICIENCYCOGENERATION PLANTS
BIOMASS
Part of the heatgenerated by theGroup comes fromthe WTE plants inBrescia, Milan andBergamo (whichaccount for an overallinstalled thermalcapacity ofapproximately 300MWt)
GEOTHERMALHEAT PUMPS
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent.
Waste
Our WorldAssets and activities
STRENGTHS
• Full integration along the value chain• Higher value/technology for waste treatment and disposal (e.g.
Waste to Energy, Mechanical Biological Treatment)• Expansion abroad by leveraging on innovative A2A systems and
international partners
(1) MBT: Mechanical Biological Treatment; (2) 2014 treated volumes as for mechanical biological treatment and other waste treatment plants; (3) The remaining revenues are owed to the Campania Region
Near Naples A2A Group, through Partenope Ambiente, manages :- Acerra WTE plant (in operation since 2009)- waste treatment plants in Caivano
• The duration of contract concession is equal to 15 years (expiry date: 2025)• A2A remuneration for WTE management is based on a part of revenues(3) from
sale of electricity produced under CIP6 regime (duration of incentive: 8 years)• Moreover, in Campania A2A owns a biogas plant
11
Back to Index
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent.
Networks
Our WorldAssets and activities
STRENGTHS
• High service quality• Good continuity of electricity and gas distribution services• Efficient customer care• E-billing system• Focus on costs• Frontier technology for public lighting (i.e., LED)• Focus on new technologies (e.g. smart grids)
12
Back to Index
Power Networks Water Public LightingGas Networks
Northern Italy
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent. 13
EPCG
Our WorldAssets and activities
PLJEVLJA
PIVA
PERUCICA
• EPCG is an integrated electricity Company (production, distribution, sales) and the only producer ofelectric energy in Montenegro
• EPCG distribution networks reach a total length of ~19,000 km. Served clients are ∼350.000• EPCG has 2,357 employees• A2A holds 41.75% of the company, which fully consolidates, and appoints CEO and CFO• New shareholding agreement is under negotiation
• WACC, equal to 6.8%, will be applied to netinvested capital (i.e. the value of the assetsin use at the end of year t-1, stated less ofany contributions received and revalued forinflation)
• Invested capital will be updated annually onthe basis of investment plans approved bythe Agency
• Depreciation will be charged over the usefullives
• Operating costs will be calculated byapplying a profit-sharing logic
POWER GENERATION
ELECTRICITY DISTRIBUTION – REGULATORY FRAMEWORK
• On December 30, 2011 the Regulatory Agencyof Montenegro (RAE) adopted the newmethodology for tariff structure, introducingconcepts of cost reflective tariff, return oninvestments and price-cap regulation
• The first regulatory period started on August 1,2012 and has a three-year term
• The duration of the final year of the regulatoryperiod has been extended to the end of 2015 inorder to align the new period beginning onJanuary 1, 2016 to the calendar year.
Back to Index
STRENGTHS
• Resevoir Hydro: almost 98% of hydro flexiblereservoir/basin vs. run-of-the-river
• Metering project: more than 60% of the total metersinstalled are fully digitalized, on track with the plan (80%of the total by 2017)
• Energetic Hub for the South Eastern Europe region• Interconnection cable with Italy: the project, carried out
by Terna, is ongoing and will be terminated by 2018
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent. 14
Concessions portfolio
Our WorldAssets and activities
(1) These concessions have been extended by a Decision of the Giunta Regionale No.X/575 of 2 August 2013, which declared the “Transitional continuation of theexploitation” until a new concession is awarded (provisionally, until 28/07/2014and subsequently postponed until 28/07/2015).
(2) These concessions have been extended by a Decree-of the Giunta Regionale No.1205 of 29 December 2010 of Regione Lombardia, which declared the “Transitionalcontinuation of the exploitation”, until a new concession is awarded.
Back to Index
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent.
A2A market position in its main businesses
15
A2A is well positioned in its main businesses, leader in district heating and in waste-to-energy activities
Our WorldBenchmarkingBack to Index
Sources: AEEGSI Annual Report, companies data, internal analysis. (1) Internal analysis applied to company productions by technology using Herfindahl Index
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent. 16
Italian utilities 2014 EBITDA and business mix
Methodological note: 1) «Liberalized market activities» include the business units Energy and International , while «Territorial Services» include the business units Renewable Energy withincentives, District Heating, Environment, Networks and Services & Other; 2) 2013 Enel EBITDA includes Enel Green Power, fully consolidated as of 2010; 3) 2013 Enel Green Power EBITDAfrom Renewable Energy with incentives is estimated.
A2A: most balanced businessmix in the sector based on2014 company results
Local
utilities
2014 EBITDA
(source: FY 2014companies’presentations)
A2A: the highest EBITDAamong local utilities
2014 EBITDAbreakdown
(source: internalanalysis)
Our WorldBenchmarkingBack to Index
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent. 17
NETWORKS - REGULATORY SCENARIO
ELECTRICITYA2A RAB:~ 0.6 € bn
5th Tariff regulatory period: 2016-2023 (8 years)• Tariff not linked to change in unit volumes consumption• Shift from input-based to output-based model as of 2016 and Totex mechanism
(optimisation of opex and capex) as of 2020• WACC: in 2016-2018, 5.6% (distribution, metering); additional remuneration
related to innovative projects and energy efficiency improvement• Gradual approach to the extension of asset life• Price cap: 1.9% (distribution), 1% (metering). The extra-efficiencies achieved in
the 3rd and 4th regulatory period are shared 50-50 with the consumer by 2019• Interim reviews: some WACC parameters (3 years) - see box
GASA2A RAB:
~ 1 € bn
4th Tariff Regulatory period: 2014-2019 (6 years)• Tariff not linked to change in unit volumes consumption• WACC: in 2016-18, 6.1% (distribution), 6.6% (metering)• WACC is applied either to RAB or to VIR* - for new ATEM’s entrants (so-called
"asymmetric regulation")• Price cap: up to 2016 1.7% for distribution and 0% for metering. Price cap
reduced to 0% in the first 2 years of ATEM’s• Interim reviews: price cap (3 years) and some WACC parameters - see box
2nd Regulatory period: 2016-2019 (4 years)• Allowed revenues based on full recovery cost as at 2014 (updated by inflation)• Regulatory matrix with six different tariff schemes, linked to the need for new
investments, the evolution of underlying costs due to consolidation orimprovement in quality of service and Opex per capita
• Fixed annual maximum tariff increases, different by each of six tariff schemes• Overall return equal to 5.3%, with an additional 1% extra return for
investments made from 2014• Introduction an X-factor equal to 0.5% to promote higher efficiency on Opex• Level of recognized costs from unpaid bills equal to 80%• Interim review: RAB and variable costs (2 years); assumptions on financial costs
and taxation can be modified every 2 years if there are "significant changes"
WATERA2A RAB:~ 0.3 € bn
Regulatory Body: the Energy Authority (AEEGSI)
Networks - regulatory framework
Our WorldAssets and activities
Back to Index
In December 2015 AEEGSI defined the WACC remuneration for theregulated energy networks, effective from 1 January 2016. Thecommon parameters are set for gas and electricity, excluding thosespecific of each sector, such as beta and D/E.
• WACC is real pre-tax allowed return.• WACC regulatory period lasts 6 years (2016-2021)• The interim review is fixed every 3 years for: Risk Free Rate;
Country Risk Premium**; Inflation used to calculate “F” factor;Gearing (value more in line with those used by other Europeanregulators), Tax Rate according to the annual Stability Law
(**) only if there is a more than 20% deviation in the average spread between 10-year government bonds of Italy and Germany vs the previous period
ELECTRICITY GAS WACC reform
(*) VIR: Asset residual value («valore industriale residuo») is equal to the capital expenditure necessary to rebuild anew the assets, depreciated due to use and obsolescence
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent. 18
Networks – gas distribution tenders
• Tenders for the assignment of the gas distribution services have to be carried out only for ATEMs (Aree Territoriali Minime), which areclusters of municipalities (177 in the whole national territory) established by the Ministry for Economic Development
• The first tenders are expected to start in 2016 and the last ones in 2018• Each concession will be granted for 12 years
A2A POTENTIAL TARGET ATEMS - MARKET SHARES AND TENDER DEADLINES
Sources: A2A internal elaboration based on MSE and Federutility data
Our WorldAssets and activitiesBack to Index
(1) According to DL n.210/2015 converted into Law n.21/2016
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent. 19
District heating - regulatory framework
Our WorldAssets and activities
Back to Index
The six priorities defined by AEEGSI - resolution 19/2015
1) Create a sector's map
2) Elaborate documents and provisions related to how the network operators publicize the prices for the heating supply,connection, disconnection and the ancillary equipment
3) Determine the tariffs for the connection to the network and the modes of exercising the right of disconnection
4) Monitor and regulate the security, continuity, commercial quality of the service, as well as the measurement devicesand systems
5) Define rules for the invoicing of consumed volumes
6) Set a reliable and stable framework for measurement and accounting of the consumed volumes, also by means ofcommunication with the competent authorities
AEEGSI is now working on the regulation ofthe district heating sector
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent. 20
Acquisitions & disposals - track record
Our WorldMajor Transactions
Back to Index
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent.
Strategic Plan 2015-2019Vision and Key Highlights
21
Our WorldStrategic PlanBack to Index
* Excluding 2014 impairment effects
∼€2B cumulated Capex (~+40% vs. 10-14)
EBITDA by 2019 €1.35B (CAGR 5.8%)
-€0.8B debt reduction in 5 years
Double digit ROI: from ~8% in 2014* to >12% in 2019
Thermal capacity reduction (-40%)
Strong growth in core skills markets
Regulated/Quasi-regulated EBITDA by 2019 ~35%
+ environment, smart networks and new energy services
DPS 2014 +10%, stable dividend set for 2015-2016
DPS bound to grow
Sustainable capital structure
KEY HIGHLIGHTSVISION
Modern and multi-business utility,essential for future needs of local communities,
leader in green economy, smart networks and new energy models
- Innovative energy andenvironment solutions
- Tailor-made solutions forcommunity needs
- Proactivity, de-centralization- People based- Operational excellence- Self-funding
- Conventional energy- Large-scale investments- Reactivity, centralization- Asset based- Cost cutting- Leveraged
STRATEGIC PLAN
Develops most concrete opportunities and resolutely addressespresent challenges starting an in-depth strategic re-positioning
FROM… …TO
RESTRUCTURESubstantial reduction in thermoelectric
power generation exposure
RELAUNCH
Growth acceleration in environment,smart networks and energy services
RESHAPEBuying options in smart city
and green economy
DISCIPLINEDiscipline in operations
and capital
DIALOGUEDialogue & engagement
with key stakeholders
DIGITALDigital & technological
transformation
BUSINESS MIXREBALANCE
DIVIDENDPOLICY AND
CAPITALSTRUCTURE
INVESTMENTSFOR GROWTH
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent.
R1 - Thermal plant restructure R2 – Relaunch of core business
22
Our WorldStrategic PlanBack to Index
-€100M of cumulated savings
-3 GW capacitySan Filippo and Brindisi plant reconversion
A2A GenCo Gas creation
€35M in increased CCGT flexibility to capturecapacity market potential
COSTREDUCTION
A DIFFERENTASSET BASE
ONE CCGTCOMPANY
KEY PLAYERIN A NEWPOWER MARKET
+20% waste collection+1 Mt waste treatment
+18% district heating volumes+13% POD managed in gas distribution
3x customer base in free market+4.0 TWh & +900Mm3 sold
+14% electricity generation-18% FTE
ENVIRONMENTSECTOR
REGULATEDBUSINESS
ENERGY RETAILMARKET
EPCG
Strategic Plan 2015-2019Restructuring & Relaunch
IMPACT ON EBITDA (€M)
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent.
R3 – Build options for the future
23
Our WorldStrategic PlanBack to Index
IMPACT ON EBITDA (€M)
Renewing street lighting with LED
Energy efficiency improvement in publicand private buildings
ENERGYEFFICIENCY
"ENERGYCOMMUNITY"SERVICES
SMART CITY
From the current test phase to extendedsolutions of distributed generation,demand aggregator, storage systems
New technological tests (smart grids,big data, …) for the design of newbusiness models
→ 250,000 installed LED
→ 5,000 energy-refurbishment projects
→ Supporting the paradigm shift of thepower system
→ Leading role in the development of urbaninfrastructures
Strategic Plan 2015-2019Reshape and additional projects under way
Additional projects
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent. 24
Our WorldStrategic PlanBack to Index
Note: on a like for like basis data excluding Aspem Spa networks opex and labour costs (exit forecast from 2017);not included new development initiatives; capitalized labour cost included, other personnel costs not included(amounting to €50M in 2014 and €35M in 2015 and 2019)
* FFO = EBITDA – provisions for bad debt - net interest expense - current tax expense + dividends received* Debt = gross financial debt net of surplus cash + employee benefits + liabilities for landfills
DISCIPLINE DIGITALDIALOGUE
€ 130M cost-cutting from identifiedprojects
“EN&A”, new project on processoptimization (not included in planfinancials)
Growing dividend policy with asustainable capital structure
Accountability & transparency vs.stakeholder (multi-stakeholder table)
Focus on people and skills developmentand entrepreneurial culture
Strong commitment to environmentalprotection and natural resources
8 key digital initiatives identified to supportenhancement of:- brand positioning- acquisition and cross-selling- social care, online and mobile services,
offer portfolioEmerging disruptive technologies, “windowopportunity”
Strategic Plan 2015-2019Discipline, Dialogue & Digital
Discipline - €130M cost savings Discipline - Dividend policy and capital structure
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent.
Strategic Plan 2015-2019EBITDA and Net Income evolution
25
Our WorldStrategic PlanBack to Index
EBITDAevolution (€M)
2014 - 2015
Net incomeevolution (€M)
2014 - 2015 2015 - 2019
2015 - 2019
2015 - 20192014 - 2015
2014OrdinaryEBITDA:951 €M
2019EBITDA:
1,354 €M
EBITDA
Regulated/freemarket mix
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent.
Strategic Plan 2015-2019Capex plan & Cash-flow generation
26
Our WorldStrategic PlanBack to Index
Capex plan
Cash-flowgeneration
* Excluding 2014 impairment effects
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent.
27
Index
Our Results Our ResponsibilitiesOur World
More in-depth, updates and documents available in the following website sections• Operating and Consolidated results: http://www.a2a.eu/en/investor/reports/• Debt: http://www.a2a.eu/en/investor/debt/• Risk Management: http://www.a2a.eu/en/investor/risk_management/
@
Consolidated Results- Consolidated Income Statement 28
- Capital Employed and Sources of Financing 29
- Consolidated Balance Sheet 30
- Consolidated Net Financial Position 31
- 2014 Quarterly Accounts 32
Operating Results- Energy 33- Cogeneration and District Heating 35- Waste 36- Networks 37- Other services and Corporate 38
Debt- Financial Strategy 39- Group Debt Structure 40- Bonds and EMTN Programme 41
Risk Management- A2A Group Risk Management 42
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent.
Our ResultsConsolidated Results
Consolidated Income Statement
Note: Group net income adjusted for the impact of extraordinary items: 2014 = 175 €M; 2013 = 156 €M; 2012 = 116 €M;2011 = 165 €M; 2010 = 243 €M
28
(1) METHODOLOGICAL NOTE - Details on criteria of the new format of Financial StatementsOn preparing 2013 financial statements, the items “Result from non-recurring transactions” and “Resultfrom disposal of other shareholdings (AFS)” have been added to the format of the Income Statement inorder to provide clear and immediate identification of the results from non-recurring transactionsforming part of continuing operations, separating these from the results from discontinued operations.
• Revenues: -11.1% vs 2013reduction in electricity sales on wholesale markets and heat sales resulting fromthe high temperatures recorded in the period
• EBITDA: -9.6% vs 20131) drop in electricity prices on the wholesale markets; 2) higher temperaturesrecorded during the year; 3) expiry (from October 2013) of the CIP 6 incentive onthe electricity production by the WTE plant in Brescia
• D&A, provisions and write-downs: +214 € mln vs 20131) lower amortisation of the tangible assets following the write-downs fromImpairment Test performed at 31/12/2013 and the review of the useful life of theCCGT plants from 01/07/2014; 2) lower write-downs carried out following theresults of the 2014 Impairment Test on thermoelectric plants (153 € mln)compared to 2013 Impairment Test (237 € mln); 3) the decrease of the net riskprovisions related to surpluses recorded during 2014 following the resolution ofsome disputes with local Authorities; 4) lower provisions for bad and doubtfuldebt as there was no longer any risk of not collecting certain receivables fromcustomers for which provisions were made in previous years
• Net financial charges +18 € mln vs 2013lower net payable financial interest on the debt for 51 € mln adjusted by thenegative performance of the variation in the fair values and in the realizedamounts of the financial derivative contracts for 33 € mln
• Affiliates: -22 € mln vs 20131) write-down, for 54 € mln, of the shareholding in Ergosud to align its book valuewith the value resulting from the Impairment Test process 2) evaluation of otherminor shareholdings positive for 9 € mln
• Income taxes -128 € mln vs 201365 € mln negative effect of sentence no. 10/2015 of the Constitutional Court,which declared the additional IRES (so called “Robin Tax”) to be unconstitutionalstarting from 12 February 2015, partially offset by the positive effects from: 1) therecording of deferred taxes on the write-downs of tangible assets, following theImpairment Test; 2) the reduction of the “Robin Tax” in 2014 which returned to6.5% after the natural expiry of the 3-year temporary increase by 4 percentagepoints provided for by Law Decree 138/2011, converted into Law 148/2011.
Back to Index
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent.
Our ResultsConsolidated Results
Capital Employed and Sources of Financing
(1) IFRIC 12 states that, based on the characteristics of the concession arrangement, the infrastructures used in the provision ofpublic services under concession are to be recognized as intangible assets if the operator has the right to receive a paymentfrom the customer for the service provided, or as a financial asset if the operator has the right to receive payment from thepublic sector entity.
(2) Net of balances included in net financial position
Scope of consolidationThe Annual Report of the A2A Group at December 31, 2014 includes thefigures of the parent A2A S.p.A. and those of the subsidiaries over which A2AS.p.A. exercises either direct or indirect control, even if the holding is lessthan 50%. In addition, companies in which the parent exercises joint controlwith other entities (joint ventures) and those over which it has a significantinfluence are consolidated using the equity method.
Changes in the scope of consolidationThe consolidation scope has been amended following the execution of theshareholding exchange agreement between A2A S.p.A. and Dolomiti EnergiaS.p.A., as discussed in the section “Significant events during the year”, as theshareholding of 7.91% in Dolomiti Energia S.p.A. is no longer consolidated.In addition, following the increase in share capital of EPCG approved by thecompany’s shareholders on July 17, 2014, the portion of capital held by A2AS.p.A. has fallen slightly to 41.75% with no changes occurring in A2A’smanagement rights over EPCG.
• The consolidated “Net Employed capital” at 31 December 2014came to 6,542 € mln and was covered by the Net Equity for 3,179€ mln and the net financial debt for 3,363 € mln.
• The “Net working capital” amounted to 348 € mln, reduced by393 € mln compared to 31 December 2013 mainly as a result ofthe reduction of the trade receivables and other current assets.
• The “Net fixed assets” amounted to 6,194 € mln, a reduction of287 € mln compared to 31 December 2013 mainly due to theamortisation and write-downs deriving from the Impairment Testcarried out.
• The “Net financial position”, equal to 3,363 € mln, improved by511 € mln compared to 31 December 2013 following the positivegeneration of cash flow attributable to the operations, partiallyoffset by the resources absorbed by the investments in tangibleand intangible assets for 307 € mln and by dividends paid for 102€ mln
29
Back to Index
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent.
Our ResultsConsolidated Results
Consolidated Balance Sheet
(1) Book values on A2A Separate Financial Statements at 31 December, 2014(2) Book value impacted by a write-down amounting to 54 € mln in 2014(3) At their general meeting on 17 July 2014, EPCG shareholders approved a share capital increase arising from the conversion of the company’s tax liability. As a result, A2A shareholding decreased to 41.75%, with no
variations in A2A rights to manage the company as established in the agreements signed in 2009
30
Back to Index
At 31 December 2014 A2A S.p.A. reserves available for distribution to shareholders amountedto 505,297,730 euro.
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent.
External auditorsAuditing activities for the separate and consolidatedfinancial statements of A2A S.p.A. are currently carriedout by PricewaterhouseCoopers S.p.A., whoseappointment was made on 26 April 2007 and will expireon the date of the meeting called to deliberate theallocation of the profits for the year 2015.
Mandate for the legal audit of the accounts for theyears from 2016 to 2024The AGM called On 11 June 2015 the AGM conferred themandate for the legal audit of the accounts for the yearsfrom 2016 to 2024 to Reconta Ernst & Young S.p.A..
Our ResultsConsolidated Results
Consolidated Net Financial Position
• The Net Financial Position at the end of 2014reached -3,363 € mln, an improvement of 511 €mln compared to 2013 (-3,874 € mln) following thepositive generation of Cash flow from operatingactivities (940 mln €).
• The reduction of the debt seems even moresignificant (-1 € bn) if compared with the valuereached at 31 December 2012 after acquiringcontrol of the subsidiary company Edipower
• The debt ratio (Net Debt/EBITDA) reached 3.3x(3.4x at the end of 2013, 4.1x at the end of 2012,5.1x at June 2012)
(1) Net of capital gains from shareholding disposals(2) Net of balances with contra-entry in equity
31
Business outlook for operations (updated at Q12015)The results achieved by the Group in the firstquarter of 2015, also determined by the benefitsderiving from the operational efficiency initiativesunderway , support, on an annual basis, a GrossOperating Margin and a net financial positionforecast in line with the targets identified in the2015- 2019 Strategic Plan.
Back to Index
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent.
Our ResultsConsolidated Results
2014 Quarterly Accounts
32
Back to Index
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent.
Our ResultsOperating Results
DescriptionThe Energy Sector comprises the following activities:• Electricity generation: power plant management through a
generation pool of hydroelectric and thermoelectric plants;• Energy Management: the purchase and sale of electricity and
fuels on national and international wholesale markets; theprocurement of the fuels needed to cover the requirementsof the thermoelectric plants and customers; planning,programming and dispatching for electricity generationplants;
• Sale of electricity and gas: marketing of electricity and gas tothe eligible customer market. Also included is the sale ofelectricity to customers eligible for “higher protection”.
2014 ResultsThe EBITDA of the Energy Business equalled 463 € mln, a decrease of 70 € mlncompared to the previous year. This trend can essentially be attributed to the drop inelectricity prices recorded on the wholesale markets (around 20%), only partially offsetby the strong hydraulicity recorded in 2014, the greater margins achieved on theenvironmental certificates markets, as well as the contribution from the carefulmanagement of the gas purchasing sources. A lower margin was also recorded by thesubsidiary company EPCG which, in this sector, showed a reduction of 21 € mlncompared to the year 2013 which benefited from higher hydroelectric production.Moreover, compared to the previous year, there were higher redundancy costs inconnection with the business restructuring plan amounting to 8 million euro.
(1) The share of electricity produced by Edipower includedin A2A portfolio is equal to : 100% as of November 2013,77% as of June 2012 and 20% previously
(2) Intermediated Ipex volumes included
EnergyOperating Review
33
Back to Index
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent. 34
(1) A2A estimates on the basis of Terna data for CCGT capacity, on the basis of Unione Petrolifera data for coalcapacity
(2) The figures include biomass, biogas and bioliquids(3) Load factor of CCGT plants not subjected to dispatching constraints(4) Equal to the ratio between reserve and requirement. Percentage calculated by using higher reserve between
winter and summer periods(5) The yearly figures refer to the thermal year(6) Italian National Price of the electricity(7) CCGT Gas Cost based on: EniMix formula for 2008-2009 with 54.7% efficiency (2008 gas cost: 35.34 c€/mc; 2009
gas cost: 27.23 c€/mc), GasRelease2007 formula for 2010-2011 with 54.7% efficiency (2010 gas cost: 28.69 c€/mc;2011 gas cost: 32.06 c€/mc), gas at virtual trading point (PSV) for 2012-2014 with 51% efficiency (previously 53%).The figures include transport costs.
(8) Spark spread net of environmental costs (GC + CO2)(9) Dark spread net of environmental costs (GC + CO2). The environmental costs for a coal plant are equal to: -15.84
€/MWh (2010); -5.09 €/MWh (2011); 1.36 €/MWh (2012); 8.52 €/MWh (2013); 8.14 €/MWh (2014). Coal plantsefficiency is equal to 35%. The figures include logistics costs.
EnergyScenario
Our ResultsOperating Results
Prices and marginsOffer and Demand
Note: the electricity installed capacity figures refer to a gross capacitySources: Terna, Unione Petrolifera, GSE, Snam and ISTAT
Back to Index
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent.
Our ResultsOperating Results
DescriptionThe Cogeneration and District Heating Sector comprises the activities ofcogeneration, district heating and the sale of heat, as well as otheractivities relating to heat management and facility managementservices. The following is a short description of these activities:• Cogeneration and district heating: production, distribution and sale
of heat, production and sale of electricity, as well as operational andmaintenance activities on the cogeneration plants and districtheating networks;
• Heat and other services: management of heating plants owned bythird parties.
2014 ResultsThe EBITDA of the Cogeneration and District Heating Business equalled 61€ mln, a decrease of 25 € mln compared to the previous year.The reduction of the margin, relative to both the District Heating sector andthe Heat Management sector, can be attributed to the unusual climaticconditions recorded in the year in question. This negative effect was onlypartially offset by the effective action of sales development and by highermargins achieved from the sale of white certificates awarded for themanagement of the district heating service in the cities of Milan, Bresciaand Bergamo.
(1) Intragroup(2) Includes the production of Lamarmora, Famagosta, Tecnocity and other plants(3) The item includes heat production of WTE plants and Cassano thermoelectric plant
Cogeneration and District HeatingOperating Review
35
Back to Index
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent.
Our ResultsOperating Results
DescriptionThe Waste Sector comprises the activities relating to the entire wastemanagement cycle. These activities are briefly described below:• Collection and street sweeping: street cleaning and the collection of
waste for transportation to its destination;• Treatment: an activity that is carried out in dedicated centers to
recover or convert the waste in order to make it suitable for therecovery of materials, waste to energy recovery or disposal inlandfills;
• Disposal: this involves the final disposal of urban and special waste incombustion plants or landfills, where possible recovering energythrough waste to energy or the use of biogas.
2014 ResultsThe EBITDA of the Waste Business equalled 222 € mln, a reduction of 60 €mln compared to 2013. This performance can essentially be attributed, for27 € mln, to the presence in 2013 of a positive non-recurrent element ofincome pertaining to the year 2012 relative to the sale price of electricityproduced under the CIP 6 scheme and, for 26 € mln, to the lower revenuesdue to the expiry of the CIP 6 agreement of the waste-to-energy plant inBrescia.
(1) of which +/- 3 € mln intragroup.(2) Waste collected in the Municipalities of Milan, Brescia, Bergamo and Varese
WasteOperating Review
36
Back to Index
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent.
DescriptionThe Networks Sector comprises the activities regulated by sectorauthorities, namely the management of the electricity and gas networksand the integrated water cycle. These activities are briefly describedbelow:• Electricity networks: the transmission and distribution of electricity;• Gas networks: the transport and distribution of natural gas;• Integrated water cycle: water captation, aqueduct management,
water distribution, sewerage and purification;• Other services: activities relating to public lighting, traffic regulation
systems, the management of votive lights and systems designservices.
2014 ResultsThe EBITDA of the Networks Business amounted to 298 € mln, up by 42 €mln compared to the previous year. The result for 2013, however,included the allocation of mobility charges relating to the companyrestructuring plan for around 12 € mln. Net of these charges, the growthof the Gross Operating Income of the Business, amounted to 30 € mln.• The electricity distribution subsector increased its margin mainly due to
the application from June of Resolution 258/14/R/eel of the AEEGSI,which led to an increase in the revenues approved for A2A RetiElettriche S.p.A. for 2012, 2013 and 2014
• The electricity distribution subsector of the EPCG Group also made apositive contribution (+10 million euro) in particular due to an increasein distribution tariffs resolved by the Regulation Authority ofMontenegro as of August 2014
• In the gas distribution and integrated water service subsectors, asubstantial alignment of the results compared to 2013.
Our ResultsOperating ResultsNetworks
Operating Review
37
(1) As of 2012, the figure includes the impact of AEEG 559/12 Deliberation, regarding theadjustment of losses equalization mechanism of medium and low voltage electricity networks
Back to Index
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent.
Our ResultsOperating Results
DescriptionThe following is a brief description of the activities carried out by thissector:• Corporate: direction, coordination and control activities, such as
business development, strategic direction, planning and control,financial management and coordination of the Group's activities;central services to support the business and operating activities (e.g.administrative and accounting services, legal services, procurement,personnel management, information technology, communicationservices, etc.) provided by the parent company under specificintercompany service agreements;
• Other services: activities relating to video-surveillance, datatransmission, telephony and internet access services.
2014 ResultsThe EBITDA of Other Services and Corporate Business amounted to -20million euro (-24 million euro in the previous year). The result for 2013 wasaffected by an accrual of 6 million euro made for redundancy costs relatingto the business restructuring plan. Excluding that effect, the sector’s marginwas essentially in line with that for the previous year.
Other Services and CorporateOperating Review
38
Note on accounting standardsThe annual report of the A2A Group at December 31, 2014 has beenprepared in accordance with the International Financial ReportingStandards (IAS/IFRS) issued by the International Accounting Standard Board(IASB) and approved by the European Union.Given the fact that the reporting standars has been undergoing manychanges, figures reported in the past may differ from the ones you findhere - which reflect the latest version of IAS/IFRS. You find more detailedexplanations in the published reports.
Back to Index
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent.
Financial Strategy
Our ResultsDebt
FLEXIBILITY• provide the Company with the right instruments to take potential
market opportunities, in a prompt and efficient way
DIVERSIFICATION• optimize financial sources and assess/select at any time the most
economical and/or best available
LIQUIDITY• maintain an adequate liquidity cushion in terms of cash and
available committed lines to cover planned cash outlays and absorblow-probability events
RISK MANAGEMENT• manage in a proactive way the interest risk with the main purpose
to mitigate the effects of market volatility
1.
2.
3.
4.
A2A financial strategy is focused on debt and cost reduction, whilemaintaining a high average debt duration and adequate financial flexibility
39
Back to Index
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent.
Group debt structure
• Total gross debt: 4.1 €Bn• Average cost of debt: ∼3.9%• Average maturity: 5.7 yrs
• 1.6 €Bn liquidity position, of which:
- 0.5 €Bn cash- 1.1 €Bn undrawn committed lines and loans, of
which 0.9 €Bn with maturities longer than the next12 months
STATISTICS RELATIVE TO DEBT AT 31 DECEMBER 2014
CORPORATE CREDIT RATING at 31/12/2014
Standard & Poor’s
BBB/A-2
Outlook Negative
Moody’s
Baa3
Outlook Stable
Our ResultsDebt
DEBT BREAKDOWN
40
Back to Index
Note: Gross Debt 2014 is equal to 4,056 €M excluding non-current derivatives (68 €M)
CURRENT CORPORATE CREDIT RATING
Standard & Poor’s
BBB/A-2
Outlook Stable
Moody’s
Baa3
Outlook Stable
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent.
Bonds and EMTN Programme
(1) Date from which interest is paid; (2) Last date on which interest accrues
Our ResultsDebt
• On 19 September 2012 the Management Board of A2A approved the adoption of a Bond Issue Programme (Euro Medium Term NoteProgramme) for a maximum amount of 2 billion euro, listed on the Luxembourg Stock Exchange
• On 6 November 2014 The Board of Directors of A2A approved and authorised the update of the Programme and the increase of the totalamount of notes which may be issued thereunder to 4 billion euro
• The adoption of the EMTN is part of the A2A Group’s medium-term financial strategy, which is aimed at lengthening the average life ofthe Company’s outstanding debt and at maintaining an adequate financial flexibility in order to efficiently manage the future debtmaturities, to support the Company’s rating
• The bonds to be issued on the basis of the Programme are placed to institutional investors• Euro Bonds 2025, 2022, 2021 and 2019 and Private Placement 2023 were issued under the EMTN Programme
41
Back to Index
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent.
A2A Group Risk Management
Our ResultsRisk Management
42
The risk management modelThe A2A Group has a risk assessment and reporting process which is based on the Enterprise Risk Management method(1) and on the best risk management practice, incompliance with the Corporate Governance Code as updated by Consob in 2011. The model, operative since 2010 and far from being a static reference, is subject toperiodic revision consistent with the evolution of the Group and the context in which it operates. The methodology adopted is characterized by the following steps:
1. Regular identification and the updating of the risks to which the Group is exposed2. Risk assessment process carried out through the involvement of all Group structures, risk owners and risk controllers, which includes:
• risk scoring , based on the probability of occurrence and the impact on the life of the Group (quali-quantitative measurement)• establishment of the relative controls and mitigation plans
3. Definition of risk priorities and risk reporting submitted to the top management for approval4. Balance sheet disclosure
Risk categorization
(1) This method follows the framework set by the Committee of Sponsoring Organizations of the Treadway Commission (CoSO report)
2014 ActivitiesIn 2014, the Group continued with its long-term development plan, which leveraging on a modular approach and on the fine-tuning of the experience gained and methodsof analysis used, is on the one hand designed to develop the assessment methodology further with specific reference to the consolidation of the mitigation process and onthe other to develop and integrate risk management activities in business processes. This process of evolution is carried out consistent with the gradual increase in theawareness of management and the business structures concerning risk management issues, including through the use of specific training support provided by the riskmanagement department.
Back to Index
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent.
Index
Our Results Our ResponsibilitiesOur World
More in-depth, updates and documents available in the following website sections• Sustainability: http://www.a2a.eu/en/sustainability/• Corporate Governance: http://www.a2a.eu/en/governance/• Investors: http://www.a2a.eu/en/investor/shares/
http://www.a2a.eu/en/investor/calendar/
@
43
Sustainability
- Main statistics and performances 44
Research and Innovation
- Research and innovation projects 47
Corporate Governance
- Traditional Governance Model 49
Investors
- A2A shareholding structure 50
- A2A one of the Blue Chips in the Stock Exchange 51
- Dividends 52
- Shareholder information 53
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent. 44
(1) The reported figures have not consequence in order to fulfil the obligations set up by 2003/87Emissions Trading Deliberation The figures refer to Monfalcone plant, which was included in theenvironmental accounting since 2010
(2) 2013 data have been restated (update of temporary data)(3) The figures refer to Monfalcone plant, which was included in the environmental accounting since
2010(4) Including only CO2 deriving from the combustion of the not organic portion of waste. 2012 and
2013 data of this item have been restated (update of temporary data)(5) Pursuant to Article 19 of Ministerial Decree of 18 December 2008, the biodegradable portion of
urban waste is equal to 51% of total production (49% not biodegradable)
Note on consolidation of sustainability statistics: EPCG not included, Edipower data included as of 2013
Main statistics and performancesEnvironment: emissions and energy performances
Our ResponsibilitiesSustainability
Sustainability tools- Sustainability Report (according to GRI)- Quality, Environment and Safety Policy- Organizational, management and control Model 231- Code of Ethics
Back to Index
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent. 45
Main statistics and performancesEnvironment: waste
Our ResponsibilitiesSustainability
(1) The 2008-2012 figures refer only to main municipalities. The quantity collected and the index of urban waste collection for recycling was calculated on the basis of the Lombardy Region indications. Municipality of Como is included as of 2014(2) 2012 and 2013 Milan figures and 2013 Group total Index have been restated (update of temporary data)(3) Other municipalities in the Provinces of Bergamo, Brescia, Mantova, Milan and Varese. The index of collection calculated as weighted average(4) Source: ISPRA(5) AMSA intermediated volumes are included as of 2010
Back to Index
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent. 46
(1) Users may be a single residential unit in the case of independent heating or the whole building in the case of centralised heating
Legend: Frequency Rate = n°accidents x 1,000,000 : hours worked; Severity Index = n°days of absence x 1,000 : hours worked; Occurence Rate = n°accidents x 1,000 : workers
Source: Energy Observatory of the Databank-Cerved Group.
Main statistics and performancesSocial: customers - personnel
Our ResponsibilitiesSustainabilityBack to Index
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent.
Research and innovation projects
Our ResponsibilitiesSustainabilityBack to Index
• A2A presented to the competent authorities a project for the construction of 2 catalytic denitrification plants(DeNOx) on Monfalcone coal plant, with an investment of ~25 € mln. The project will help to ensure, as of 2016, areduction in emissions of NOx to concentration values in the flue gas not exceeding 180 mg/Nm3 hourly (-60%compared to current levels), below the limit set by EU and aligned to Best Available Techniques (BREF)
Nitrogen oxidesreduction in
Monfalcone coal plant
Renewable sourcesand Solid Secondary
Fuel at San Filippo delMela
• Conversion of the Group 2 of San Filippo del Mela thermoelectric plant, expected to be fully powered by SolidSecondary Fuel. In relation to these project information is being exchanged with the Sicily Region and a technicalwork group was set up at local level
• Innovative cogeneration and high efficiency module of concentrated photovoltaic conversion and tracking of sunexposure. In partnership with the Research Institute Fondazione Bruno Kessler and Optoelettronica. Testing in 2015
• experimental solar thermodynamic plant (~1 MWt). The unit, developed by Magaldi, uses a system of solar receiversand a fluid bed sensor consisting of sand instead of the more common molten salts (lower pollution risks)
• Plant for anaerobic digestion in pressure (EU H2020 PROBOVIRI). Edipower, University of Messina and NationalAgency ENEA have presented to the EU funding requests. The project passed the first stage of evaluation waspresented in early 2015
The first solar plant inSouthern Europe for
District Heating
• A2A realized in Varese the first thermal solar plant for urban district heating ever made in Southern Europe. Thispilot plant, built by SDH Energy, will produce heat from completely renewable sources in order to supplement theheat demand of the district heating network, primarily for the production of domestic water in the summer months
• Annual savings: -43 toe, -108 CO2 tons, gas corresponding to production of 450 MWht
New low-emissionboilers for the district
heating plant inLamarmora
• The project, already authorized, involves the substistution of existing cogeneration groups and boiler (about 355MWt) with 3 new superheated water boilers, fired by natural gas with total capacity of 285 MWt
• The new units will be fuelled only by natural gas and will be equipped with the best available technologies forreducing emissions
E-Moving project –Electric Car
• Development and field test of a public and private electric vehicles charging infrastructure mainly in Milan and BresciaCharging services for final user and support to car sharing that use electrical vehicles (provided by Renault)
• Charging points actually activated : 100 public, 150 private. About 600 final users involved
47
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent.
Research and innovation projects
Our ResponsibilitiesSustainabilityBack to Index
• A significant improvement in terms of economic sustainability, efficiency, light pollution, safety
Milan and Bresciafully illuminated by
LED technology
Milan Brescia
LED light points to be installed 141,963 by August 2015 42,774 by December 2016
Annual energy consumption From 114 to 55 GWh From 18 to 11 GWh
Annual saving -11k toe, -23.7 ktons of CO2 -1.3k toe, -2.7 ktons of CO2
Total expenditure by A2A 38 mln € 12 mln €
Technology: AEC, Diani, Neri
Water quality -reduction of
hexavalent chromium
• The technique is based on reducing hexavalent chromium to trivalent chromium through the addition of ferrous sulphateand its removal by filtration. After a first experimental plant has been installed, already at the end of 2014 70% of thewater fed into the aqueduct of Brescia had a concentration of hexavalent chromium < 2 μg/l. The forecast is to reach100% by 2015. A2A contributed entirely to the project for 4 € mln
S.C.U.O.L.A. (SmartCampus as Urban
Open Labs)
• New Energy Manager System optimizing energy consumption in presence of renewable energy production and storageand innovative smart electric veichles’ charger integration
• Energy demand/response function between final users and DSO;• Energy buildings real-time data collection for statistic analysis and final user awareness• Prototype of hybrid photovoltaic panel producing electricity and heat (testing energy storage integration)• Co-financed by Regione Lombardia. Project and technological partners: Politecnico of Milan, University of Brescia, ADB,
Italdata, GFM Net, Coster, CPL Concordia, SIEL, CEL, LU-VE
B.S.L. Brescia SmartLiving
• Design and development of an innovative smart city architecture: new telecommunication hybrid network for Internet ofThings; data collection from smart meters and smart sensors indoor and outdoor; smart lighting; smart gas meter withinnovative features; Integrated home energy management services; platforms providing info and services at city, district,end user level; services for security and safety of operators, for monitoring and support fragile people.
• Co-financed by the Ministry of Education, Universities and Research. Partners: Enea, University of Brescia and others.Technology: ST Microelectronics, Beretta, Cavagna, TeamWeare, FGE, Iperelle
Other smart gridprojects
• IDE4L (Ideal Grid for All) focuses on grid automation, congestion management and Distributed generation. The project,co-financed by the EU within the 7th Framework Program, is now halfway and will end in August 2016. Partners: TampereUniv. of Technology (Finland), Unión Fenosa Distribución (Spain) and others. Technology: Telvent
• Smart Domo Grid: a smart grid solution with demand/response functionality such as control of smart appliance, energystorage systems, etc, all to improve the controllability of the distribution grid. A pilot system in Brescia was concluded inMarch 2015 (involving ~20 families). Co-financed by the Ministry of Economic Development. Partners: Politecnico of Milanand Whirlpool. Technology: Whirlpool
Most of A2A R&D budget is dedicated to infrastructure projects48
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent. 49
Our ResponsibilitiesCorporate Governance
Back to Index
CommitteesOn 17 June 2014 the Board of Directors appointed• the Executive Committee, with the role of providing consultative input in the coordination
of the executive directors’ activity, and preparing proposals for the Board of Directors.• 3 Committees: Control and Risks; Appointment and Compensation; Territory and
Sustainability. Roles are pursuant to the guidelines defined by the “Corporate GovernanceCode” by Borsa Italiana
(1) As per Code of Self-Discipline by Borsa Italiana
Substitute Statutory Auditors:Onofrio Contu, Paolo Prandi
Chairman - executiveDistinctive responsibilities with regard to relationships with the shareholders,institutions, regulatory authorities, the media, and external relations and, incoordination with the Chief Executive Officer, relating to the preparation ofproposals entailing non-recurring transactions.
Chief Executive Officer - executiveBroad powers for the Company’s ordinary operations
Traditional Governance Model (as of 13 June 2014)
Board Of Statutory Auditors(3 standing auditors and 2 substitute auditors)• Two standing auditors and one substitute auditor are drawn from the list obtaining the highest number of votes,• The third standing auditor and the other substitute auditor are drawn from the other lists on the basis of a
quotient mechanism. The Chairman of the Board of Statutory Auditors is the first candidate of the list obtainingthe second highest number of votes.
The 2014 AGM established the following annual remuneration:• Euro 80,000 for each member of the Board of Directors;• Euro 100,000 for the Chairman of the Board of Statutory Auditors’ and Euro
70,000 for the Effective Statutory AuditorsBoard of Directors decided remuneration for the top positions (i.e., the Chairman,the Deputy Chairman and the Chief Executive Officer) to be reduced by over 50%compared to the old system, with an overall Group saving higher than 65%.Further details are shown in the Report on Remuneration
Remuneration
FROM
TO
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent.
A2A SHAREHOLDING STRUCTURE(1)
Istitutional investors: 31.5% of share capital
Geographic breakdown:
• UK 26.3%
• Italy 24.9%
• USA 15.0%
• France 10.6%
• Luxembourg 8.8%
• Germany 4.1%
A2A shareholding structure
At December 31, 2015:
- Share capital: 3,132,905,277 shares with a par value of 0.52 euroeach
- Market cap: 3,929 €M
- Treasury shares: 26,917,609, equal to 0.86% of the share capital
All shares are voting shares, although - as laid down in art. 9 of by-laws -no individual shareholder other than the Municipality of Milan and theMunicipality of Brescia may hold an equity interest exceeding 5% of theshare capital. Should such ceiling be exceeded, the voting right attached tothe shares held in excess of 5% of the share capital may not be exercised.
Current shareholding pact between Milan and Brescia municipalities wassigned on 30 December 2013 and expires on 31 December 2016. The majorshareholders agreed to change the governance model, from dual totraditional. This change took place at the 2014 AGM.
Retail investors: 16.2% of the share capital
Geographic breakdown:
• Italy 99.4%
• Foreign: 0.6%
55.2% of retail investors are in Lombardy, the region where historically A2Ahas been more active. Investors from the provinces of Milan and Brescia ownrespectively 25.2% and 11.8% of the total retail shareholding.
The above-mentioned data are based on the shareholders register updated at 24 June 2015 (dividend payment date).
Number of shareholders: about 96,000
Our ResponsibilitiesInvestors
50
Back to Index
(1) Real time updates available at: http://www.a2a.eu/en/investor/overview/shareholding_upd.html
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent.
Our ResponsibilitiesInvestors
A2A one of the Blue Chips in the Stock Exchange
A2A vs FTSE MIB and EURO STOXX UTILITIESA2A in 2015(Prices 30 December 2014 = 100)
A2A 2015 figures (Borsa Italiana)
Market capitalisation at December 31, 2015: € 3,929 m
Average capitalisation: € 3,405 m
Average volumes: 17,204,368
Average price 1.087 €/share
Maximum price 1.352 €/share
Minimum price 0.792 €/share
Number of shares 3,132,905,277
A2A stock is also traded on the following platforms: Chi-X, BATS, Turquoise,Equiduct, Sigma-X, Aquis, BOAT OTC, LSE Europe OTC, BATS Chi-X OTC
51
Back to Index
Moreover, A2A has been included in the EthibelExcellence Investment Register and in the EthibelPioneer Investment Register
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent.
Our ResponsibilitiesInvestors
Dividends
(1) Dividend Yield calculated on annual average share price(2) Pay-out calculated on ordinary income (net of non-recurrent items)(3) Proposal by the Board of Directors to be submitted to AGM(4) As of 6 April 2016 shares eligible for dividends are equal to 3,071 millions after first execution of the buyback program
Dividend PolicyThe Business Plan 2016-2020 provides for a growth and sustainable dividend policy, based on the assumption of stability for the two-year period2015-2016 and growth in the following years. In 2019-2020 dividend is set to approximately 0.075 €/share, corresponding to a payout ratio up toaround 60%.
Dividend taxationDividends no longer attract any tax credit and, depending on who the recipient is, they may be subject to withholding tax at source or, in part,contribute towards taxable income.
For the year 2015, A2A Board of Directors proposed a dividend distribution equal to 0.041 euros per ordinary share, up by 13% with respect to 2014, tobe approved by the Shareholders’ Meeting, entirely taken from Other Reserves
52
Back to Index
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent.
Shareholder information
Shareholders’ meetingsAs laid down in A2A by-laws, the company holds one compulsory Shareholders’ GeneralMeeting per year. The Annual General Meeting is called by the Board of Directors within120 days (or 180 days under certain circumstances) of the end of the fiscal year. Withreference to the procedures for the AGM call, please refer to A2A By-laws and CorporateGovernance section of the company website (i.e., Shareholders’ Meetings). This sectionalso contains all relevant documents for the AGM.
American Depositary ReceiptsA2A American Depositary Receipts (ADRs) are traded on the US Over The Counter market(OTC) under the symbol AEMMY. Three unsponsored ADR programs were launched byDeutsche Bank (2008), BNY Mellon (2008) and Citibank (2014) respectively. In all cases,one ADR represents five A2A ordinary shares. Further details are available at websiteswww.adr.com and www.sec.gov.
A2A Investor Relations policy• Main goal: promote and support the correct knowledge and valuation of the A2A
stock by the financial community, through a communication which is active,transparent, well-timed, constant, correct and not discriminatory
• Core activities:- hold regular meetings (one-to-one and group meetings) with the financial community
in Italy and abroad- arrange conference calls with the management at the time of the release of the Group
results- organize International roadshows with the top management for the presentation of
important strategic developments• Blackout period: during the 15 days before the release of the financial resultsThe IR department is not in charge neither of comments about A2A performance in theStock Exchange, nor of financial advice about the investment in A2A.
DocumentationAnnual Reports, Quarterly and Interim Reports, Sustainability Reports, Corporate Governance Report andReport on remuneration are available on our website (www.a2a.eu ). They may also be obtained, onrequest, from the Company Secretary at the company’s registered office or through e-mail at [email protected] .
Our ResponsibilitiesInvestors
53
Purchase and disposal of treasury shares: main pointsThe 2015 Shareholders’ General Meeting authorized the Board of Directorsto conduct treasury share purchase and disposal transactions:• the maximum number of treasury shares that can be held is 313,290,527,
which is equal to one-tenth of the shares making up the share capital,considering the shares already owned by A2A S.p.A. and by itssubsidiaries;
• treasury share purchases and disposals will be conducted to pursue, in theinterest of the Company and in respect of the principle of equal treatmentof shareholders and of current applicable regulations, objectives such astransactions related to cash flow management and transactions relatedto industrial plans consistent with the Company strategy, with regard towhich there will be opportunities for share exchanges;
• The authorization to purchase and dispose of the shares will have a termof validity of 18 months starting on the date of the Meeting resolution
Additional InformationAdditional information about A2A is available at www.a2a.eu. Share price information, previousAnnual Reports and Interim Accounts, press releases and other relevant information can be found inthe Investor Relations section of that site. Comments and suggestions are welcome (email: [email protected]).
Back to Index
In case of payment of dividend for the fiscal year 2015, it will be available from 25May 2016. Ex-dividend date is 23 May 2016 – Record date on 24 May 2016